When Connie Swartz began hiring employees, seven years ago, her fledgling consulting firm in Kansas City, Mo., couldn't afford hefty salaries and fancy benefits packages. But Swartz had something that a growing number of employees value even more -- flexibility. Since then, she has hired six employees, all of whom have flexible hours, the ability to work from home, and a strong say in their budgets and how they're compensated. "People know how we work now," says Swartz, "and we're constantly getting rÉsumÉs from highly qualified professionals."

The company, Creative Courseware, now at $500,000 in revenues, still doesn't have a formal benefits package, but that's because employees have voted consistently for increases in hourly wages as opposed to, say, health insurance. "I don't have the benefits, and I don't make as much money as I would at a large company, but I have flexibility," says instructional developer Mary Lee, who, like all employees, is paid by the hour. "If my kids are sick," Lee says, "I stay home and work at night." Swartz thinks her structure attracts the kind of self-motivated employees she needs in her business, which requires a lot of independent analysis and creative thinking. Since good communication is vital to her system's success, Swartz works hard to keep everyone informed. Every month, she distributes notes on clients and the status of proposals. She holds formal staff meetings every two months and hosts an annual three-day off-site retreat at which the group discusses long-term strategy, compensation, the company's financial position, and so on. There are also yearly "bidirectional" reviews, which allow employees to give Swartz feedback on her performance. She must be doing all right: for the past five years her turnover has been zero.